07.03.16 Monday Morning

Following last week’s manufacturing malaise, services slump and a mixed US jobs report focus firmly turns to Thursday’s ECB meeting, with pressure on Mario Draghi to bust out his big QE needle and dose up the Eurozone with some fresh stimulus.

Eurozone
With the region-wide manufacturing and services PMIs each hitting their worst level in over a year it was remarkable that the Eurozone indices managed any growth last week. Yet following a limp end to February on Monday both the DAX and CAC burst into life as March got underway last Tuesday, a post-surge stumble failing to prevent the indices from nearing recent highs by the end of the week.

Attention now, of course, turns to the region’s central bank. A string of disappointing data, including the first negative inflation reading since last October, leaves Mario Draghi with little wiggle room when he reveals the ECB’s latest musing on Thursday. Repeatedly the smooth-talking Italian has stated his, and the central bank’s, commitment to doing ‘whatever it takes’; investors, then, will be expecting a lot from March’s meeting, with the chance for gleeful gains or a disappointed decline dependant on whether Draghi puts the region’s money where his mouth is.

In the run up to that all-important ECB press conference on Thursday the Eurozone sees a few dribs and drabs of data; French, German and Italian industrial production data is released across the week, as are the German and French trade balance figures. Germany then bookends the week with its factory orders (on Monday) and inflation (on Friday) data, whilst there are also Eurogroup and ECOFIN meetings on Monday and Tuesday respectively. Earnings-wise there are releases from Hugo Boss, Telefonica Deutschland Holding and Carrefour.

US
Nearing 17000 the Dow Jones had a pretty good start to March, despite a procession of disappointing data including its first contraction-level Markit services PMI since October 2013, a marginally better than expected but still contraction-level ISM manufacturing PMI and a the worst wage growth figure in over a year (even with the headline non-farm employment change seeing a healthy 242k).

Things are far slower this week. FOMC members Lael Brainard (fairly dovish) and vice-chair Stanley Fischer (neutral) both speak on Monday, potentially providing the markets with a peak into the Fed’s state of mind ahead of its impending March meeting, whilst Thursday sees the usual jobless claims before Friday rounds things out with the latest import prices and the preliminary UoM consumer sentiment data. The most eye-catching earnings, meanwhile, come at the start of the week, both Shake Shack and Urban Outfitters revealing their fourth quarter figures.

UK
Like the rest of the world the UK suffered its own embarrassing manufacturing and services PMIs last week; the former teetered on the edge of contraction territory at a 34 month low of 50.8, whilst the latter slunk to a near 3 year nadir of 52.7. Nevertheless the FTSE managed to hit, fall from, and the climb back near its 2016 peak, aided by Brent Crude’s tentative adventure to $37 per barrel.

A quiet start to this week then gives way to a slightly busier second half, with the latest NIESR GDP estimate, manufacturing and industrial production figures on Wednesday and the trade balance and consumer inflation expectations on Friday. Things are more interesting over in the equities; Foxtons will be hoping for lift away from its year-nadir on Tuesday when it reveals its full year figures, whilst the FCA-investigated Prudential and Frankie & Benny’s-owning Restaurant Group report on Wednesday, an Amazon-coattails-riding Morrisons and a buoyant Cineworld on Thursday, and a slightly inebriated Wetherspoons (see below) on Friday.

Stock of the week: JD Wetherspoon PLC - Full Year 2015 Earnings Release
Like one of its regulars exiting the pub after a heavy night out Wetherspoons has spent the last few months falling to the ground only to pick itself back up again to have another go.

Most recently the stock saw a 10% plunge (all the way to £5.89, a level not seen since May 2013) on the 20th January after it issued yet another warning about its full year profit expectations, stating that they would be at the lower end of expectations due to the continued effects of increased hourly wages for its workers. Once again it was falling margins that hurt the company, a 1.1% drop to 6.3% for the first 6 months of the year overshadowing the 6.1% rise in total sales for the same period.

However, in what is a familiar pattern for Wetherspoons, the stock soon bounced back, climbing all the way to a current trading price of £7.24 (IT-Finance.com, 04/03/2016), ignoring much of February’s volatility in the process. There is a chance the company’s rise could continue post-half year figures on Friday; since profit expectations are pretty low (to put it mildly) any positive surprise may be taken as a huge bonus, especially since investors seem incredibly willing to lift Wetherspoons up whenever they are given the chance.

 

(Source: IT-Finance.com 04/03/2016)